Debt restructuring

Debt restructuring

If it is not possible to reach a payment arrangement with all creditors, an application for statutory debt restructuring can be submitted to the court. Debt restructuring is available only to natural persons, owners of a sole proprietorship, partners of a General Partnership (VOF), and managing partners of a Limited Partnership (CV).

To be eligible for the Debt Restructuring Act for Natural Persons (Wsnp), a number of conditions must be met. Firstly, it must not be possible to pay off the debts oneself. Secondly, an attempt must have been made to repay the debts through debt assistance. Furthermore, use of the Wsnp must not have been made for ten years, subject to a number of exceptions where the court may still grant Wsnp. Moreover, the applicant must have acted in good faith regarding the non-payment of debts over the past five years. In the case of addiction or psychosocial problems, confirmation of a check by a debt counselor must be provided. The debts must also not arise from committed crimes. Finally, the applicant must comply with the obligations of the Wsnp and must make every effort to earn as much money as possible.

An application for the Wsnp is submitted to the court. Subsequently, a hearing will take place. If the applicant is not present at the hearing, the application will be rejected. Within one to two weeks after the hearing, the judge decides whether the Wsnp is granted.

When applying for the Wsnp, it is advisable to engage legal assistance to discuss the options. Additionally, it is possible to lodge an appeal and appeal to the Supreme Court against the rejection of the Wsnp.

Questions about debt restructuring? Please contact us.

Debt restructuring within restructuring and insolvency

Statutory debt restructuring is one of the instruments within our Restructuring and Insolvency. While a legal entity such as a private limited company (BV) ends up with a suspension of payments, bankruptcy , or a private creditors' agreement, the Wsnp (Dutch Debt Restructuring Act) serves as the final step for the natural person behind the business: the sole proprietorship, the partner in a general partnership (VOF), or the managing partner in a limited partnership (CV) who is personally liable. At MKB Juristen, lawyers and in-house counsel collaborate on these processes, ranging from an international group seeking to restructure a group company to the baker on the corner struggling with personal and business debts.

Wsnp modernized: processing time since July 1, 2023

The debt restructuring scheme has been substantially amended. For proceedings pronounced on or after July 1, 2023, a standard term of eighteen months applies pursuant to Article 349a of the Bankruptcy Act, instead of the old term of three years. The judge may shorten this term if the debtor has already saved money during the amicable settlement phase, or extend it to a maximum of three and a half years if the nature of the debts warrants it or if the debtor is unable to meet all his obligations. In addition, the old ten-year term has been relaxed, making a second admission to the Wsnp possible sooner. This modernization makes debt restructuring significantly more accessible for entrepreneurs with personal debts.

The amicable process and the Article 285 declaration

Statutory debt restructuring is a final step. First, an attempt must be made to reach an amicable settlement with the creditors, usually through municipal debt assistance. If this fails, a declaration is issued pursuant to Article 285 of the Bankruptcy Act stating that an out-of-court settlement is not possible. This declaration is a prerequisite for applying for the Wsnp (Debt Restructuring Act). For entrepreneurs, this process is often more complex than for private individuals, because business and private debts overlap and creditors have divergent interests. We provide guidance in developing a well-substantiated proposal so that the amicable settlement process has a realistic chance of success.

Compulsory agreement, moratorium and preliminary injunction

If the vast majority of creditors cooperate but a single reluctant creditor blocks the arrangement, a compulsory settlement can be requested simultaneously with the Wsnp application pursuant to Article 287a of the Bankruptcy Act. The judge can then compel the reluctant creditor to agree, provided that the proposed settlement represents the maximum achievable. The compulsory settlement is faster and cheaper than a full Wsnp process. If, in the meantime, an eviction, energy disconnection, or forced sale is imminent, a preliminary injunction can be requested pursuant to Article 287 paragraph 4 or a moratorium (cooling-off period) pursuant to Article 287b of the Bankruptcy Act. These instruments provide breathing space while the application is pending.

What happens to the business during the Wsnp?

Upon admission to debt restructuring, an administrator is appointed to manage the assets and liquidate them for the benefit of the creditors. In most cases, this means that the business is terminated and business assets are sold. The administrator determines the amount to be left free for fixed expenses and living expenses; whatever the debtor earns above that amount flows into the bankruptcy estate. Continuation of the business may sometimes be permitted if it is in the interest of the creditors. We advise entrepreneurs in advance regarding the consequences for their business and whether a restart or settlement outside the Wsnp might be a better alternative.

Clean slate and early termination

Anyone who properly complies with the obligations of debt restructuring receives a clean slate at the end of the term: pursuant to Article 358 of the Bankruptcy Act, the remaining unpaid debts are no longer enforceable thereafter. There are exceptions to this clean slate, including for certain criminal fines and for claims arising from a mortgage insofar as these can be satisfied by foreclosure. If the debtor fails to meet his obligations, incurs new excessive debts, or prejudices the creditors, the court may terminate the arrangement prematurely pursuant to Article 350 of the Bankruptcy Act, usually without a clean slate and often followed by bankruptcy. Achieving a clean slate therefore requires strict compliance, where proper guidance makes all the difference.

Frequently asked questions about debt restructuring

Do I need a lawyer to apply for the Wsnp?

Hiring a lawyer is not mandatory, but it is advisable. The preparation of the amicable settlement process, the substantiation of a compulsory settlement, and the timely application for preliminary relief require careful attention. Moreover, in the event of a rejection, you may appeal and file for cassation, for which legal representation is required.

Can a private limited company (BV) participate in debt restructuring?

No. The Wsnp applies only to natural persons. A BV or NV facing payment difficulties enters a suspension of payments, bankruptcy, or a settlement; debt restructuring focuses on the entrepreneur as a private individual, such as the owner of a sole proprietorship or a partner.

How long does debt restructuring take?

Since July 1, 2023, a Wsnp process lasts eighteen months in principle. The judge may shorten this term or extend it to a maximum of three and a half years.

What is the difference between debt restructuring and a creditors' agreement?

In a creditors' agreement, creditors jointly offer a settlement that becomes binding, possibly via a compulsory agreement. The Wsnp is the statutory debt restructuring process under the supervision of a judge-commissioner and administrator that ends with a clean slate. Both routes are often weighed against each other.

Apply for debt restructuring with MKB Juristen

Are you an entrepreneur struggling with debt, or do you want to know whether the Wsnp, a compulsory settlement, or an out-of-court arrangement is the best fit? Our restructuring and insolvency lawyers and corporate counsel will work with you, from the initial analysis to a fresh start. Contact us without obligation to discuss your situation.